Report finds misconduct spread within the ATO
The Australian Taxation Office is under fire after a damning independent report found evidence of maladministration, including targeting a dead taxpayer for five years after she’d passed.
The investigation by Tax Ombudsman Ruth Owen was ordered by ATO Commissioner Rob Heferen after A Current Affair highlighted the treatment of businessman Jae Jang last July.
The investigation by Tax Ombudsman Ruth Owen was ordered by ATO Commissioner Rob Heferen. A Current Affair
The 144-page report has left seasoned tax professionals stunned, creating concerns about misconduct spread through the ATO.
“This is certainly the most strongly worded comments about ATO misconduct that I’ve ever seen,” said Bruce Collins, who spent 35 years working for the tax office, as high as an assistant commissioner.
“Of all the ones I’ve read and been involved with, on both sides of the fence, this is probably the most significantly critical of the ATO in relation to issues of maladministration,” said Collins, who is now a tax lawyer representing Jang.
The Tax Ombudsman findings uncovered evidence of “maladministration” by the ATO, a pattern of bias and prejudicial conduct, unreasonable use of discretionary powers and actions contrary to procedural fairness across a number of teams within the tax office and “not limited to just one or two individual officers”.
One element of misconduct was even found to constitute “serious maladministration” involving two ATO investigators disclosing confidential taxpayer information to third parties.
One of those breaches came from investigator Anthony Rains to New Zealand government agencies.
The Ombudsman found his contact was speculative and unreasonable, creating a “perception of bias” and “inappropriate targeting” beyond the ATO’s jurisdiction, by recommending the New Zealand tax office conduct an audit on Jang’s businesses.
Collins described these disclosures as “a very serious area of misconduct” that should warrant further investigation, but an ATO spokesperson declined to answer questions about what action had been taken.
“The ATO welcomes the Ombudsman’s thorough review, and the finding that there were no instances of unlawful conduct or misfeasance,” the spokesperson said.
These comments conflict with the Ombudsman’s report, which specifically stated it had “not assessed whether these disclosures breached the tax secrecy provisions, as this is outside our terms of reference”.
Jang, a 58-year-old businessman with no criminal history, was arrested and thrown in jail over tax fraud charges before eventually being exonerated during a 10-year battle with the ATO.
His sister Deannah was also targeted. He blames the ATO’s pursuit for her death by suicide in 2017.
The Ombudsman found garnishee notices issued against Ms Jang, were “unwarranted and unreasonable” and gave the impression of “guilt by association”.
“The ATO’s debt recovery actions against Ms Jang were inappropriate and lacked consideration for the potential impact on her,” the Ombudsman said.
“There is however no evidence of any direct link between the ATO’s actions and her decision to take her own life.”
Not even death was enough to stop the ATO, with the Ombudsman finding Ms Jang was pursued for five more years after passing with ever-increasing penalty notices, causing “unnecessary distress to her family” in what was “a serious failure of process and governance within the ATO”.
The Ombudsman’s report has now sparked four additional lines of enquiry to assess how widespread the misconduct is within the tax office.
Two of those are “independent systemic investigations” by the Tax Ombudsman regarding impartiality and also internal record-keeping which was lacking in Jae Jang’s case.
“If they don’t keep the records, then that evidence trail isn’t there for the ATO to properly manage their staff, or for taxpayers to properly challenge ATO actions,” Collins said.
A Current Affair highlighted the treatment of businessman Jae Jang last July. A Current Affair
An ATO spokesperson declined to answer 18 detailed questions about the most concerning findings, instead issuing a statement.
“The Ombudsman considered allegations raised by the taxpayer and found the majority of these, including the most serious allegations, to be unsubstantiated,” the spokesperson said.
“Notwithstanding this, we acknowledge that there are some areas where improvements are to be made, and we have already begun making process improvements.”
Jae Jang called on the ATO commissioner to take “urgent action to ensure the misconduct they have committed doesn’t happen again,” pointing out his own complaints to the ATO were ignored.
“The word ‘serious maladministration’ has come to my attention and yet I’ve made a number of reports to ATO internal investigations and they found nothing,” Jang said.
One ATO staff member subject to adverse findings is Anthony Rains, who remains employed by the ATO but no longer works as an investigator.
The Ombudsman’s report is now the second authority to find misconduct in relation to his work at the tax office.
In a separate case last October, a Queensland Supreme Court judge found eleven instances of misconduct, including Rains deliberately altering evidence, preparing a false witness statement and lying in a briefing note to the Queensland bar.
That case is now under appeal.
Collins believes all cases involving evidence gathering by Rains should be under review.
“The difficulty we have is that when there’s a few bad actors in the ATO, the ATO has a responsibility to identify them and deal with them,” Collins said.
“The majority of people in the ATO are doing the right thing and are committed to supporting taxpayer compliance, but when the wheels come off, taxpayers can suffer.”
Jae Jang intends to file civil proceedings of malicious prosecution against the ATO commissioner and Anthony Rains next month.
“I intend to find the truth,” he said.
“Surely Anthony Rains didn’t work on his own. There must be someone who understands and condones his actions well above him.”
As the minister responsible for the ATO, Assistant Treasurer Daniel Mulino released a statement that the government expects the ATO to “deal with Australian taxpayers honestly, transparently and fairly”.
He is waiting to see the final report from the Ombudsman’s follow-up investigations before commenting further.
Statement by the ATO
“The ATO acknowledges the Tax Ombudsman has completed their independent investigation into the ATO’s management of a complex and long-running case.
“The Ombudsman considered allegations raised by the taxpayer and found the majority of these, including the most serious allegations, to be unsubstantiated. Notwithstanding this, we acknowledge that there are some areas where improvements are to be made, and we have already begun making process improvements.
“The ATO welcomes the Ombudsman’s thorough review, and the finding that there were no instances of unlawful conduct or misfeasance.
“We also note that the Tax Ombudsman has commenced a review to explore whether there are any underlying systemic issues and opportunities for improvement arising from her own motion review, and we will continue to engage openly and constructively as this work progresses.”
Statement by Assistant Treasurer and Minister for Financial Services, Daniel Mulino
“It is the government’s expectation that the ATO deal with Australian taxpayers honestly, transparently and fairly.
“The government supports the work of the Tax Ombudsman and notes the statement regarding the completion of the case.
“As the final report is not yet released it would be inappropriate to comment further on the matter.”
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